Erica Vilkauls, former CEO for womenswear retailers LK Bennett and East, discusses the importance of leadership and offers her predictions for the retail landscape post-coronavirus.
Liquidity, liquidity, liquidity: the focus for all retailers and the single most important thing to survive. If you were a strong brand with sound finances going into this pandemic, it’s likely you will come out of it.
But we can’t defer thinking about the future because we are not in an office with our teams. We need to do different things at different times and it’s important to identify which things need to be tackled in order. The three stages are “respond”, “recover” and “thrive”.
Leadership is crucial
In an article published last month, called Leadership in the Crucible of Crisis, Deloitte said: “CEOs have the substantial and added responsibility [because of the coronavirus] to nimbly consider all three time frames [respond, recover, thrive] concurrently and allocate resources accordingly.”
Leadership is crucial for retail brands to succeed now more than ever before.
“Resilient leaders are skilled at triage, able to stabilize their organizations to meet the crisis at hand while finding opportunities amid difficult constraints”, Deloitte added.
A brand’s survival may well depend on the skill and resilience of its leader. These leaders are making decisions that need immediate action, while also performing sensitivity analyses to establish what future actions would be required within a variety of timescales.
The chief operations officer and chief financial officers have key roles to play, alongside the chief executives. The COO can be working now, analysing supply chains and operational structures, including communication and IT, as well as staff. CFOs can work now to establish how sales can be optimised, how cash can be preserved and ensuring they get all the assistance being offered by the government.
Other key roles are chief people officer and chief digital officer. But the new “shape” of the business needs to be established by the group before any people or channel changes are implemented.
There is much talk of a chief transformation officer at the moment. This is an opportunity to bring an experienced retailer into the business – one who can work with all business areas and put a plan and timeline together, plus ensuring all thoughts and plans are joined up. I see this is a good opportunity to bring in an interim person. Interim professionals work quickly and are focused on the tasks in hand.
They aren’t invested in the emotion of the business and have no ties or loyalties to individuals. They also aren’t interested in the politics, and do not need to be competitive with other directors. It is also easier for directors to accept direction from an interim with expertise of managing out of tricky situations, as they don’t feel threatened by a temporary person.
Planning to ensure you come out of this with a business that has the cash and resources to continue needs to happen now. I would think that if the CEO and board have the experience of performing a turnaround and a restructure then they should be doing this now. I do think they need external help, and using “interim” talent means there is not long-term liability to these people. It’s temporary, experienced help.
Know your consumers
Customer insight data may be one of the best tools we have, and analysing shifts in consumer behaviour will be crucial to restructuring and replanning these businesses to ensure success. It’s unlikely current consumer behaviour, such as only buying online and spending more on food, DIY and home goods, will continue in its entirety, but it’s also unlikely consumers will just revert to previous behaviour.
This is why the analysis of the data is so crucial. It will be important to interpret the results and assess temporary behaviour from a complete shift. However, more than poring over data ad infinitum, it’s critical to act speedily. There’s little point waiting for a “perfect” data set before making decisions.
What is certain is that retailers won’t need all their previous physical space – but that was true before the coronavirus outbreak happened. Retailers must fundamentally change their infrastructure, and this can be planned now.
All retailers need to change, even those strong ones, as the world has changed. It’s the degree of that change and in which direction it is going that retailers will need to examine and face. The underlying cost structure needs to be thoroughly analysed, and hard decisions will need to be taken.
Most people seem to agree that we will see profound social change, but I wonder if these changes will be different across the age profile of consumers. The real challenge for all retailers is, “What will normal look like?” Robust analysis has to be performed and bold decisions need to be taken now. We have data to help us, and it’s critical this is used. Insights into human behaviour are also really useful, and it is worth getting expert help from this field to inform and to help with checks and balances.
My predictions for the retail landscape after coronavirus
- Brands flooding to online market places to replace sales in part when their physical stores close
- Accelerated shift to online shopping
- Flurry of sales of brands with strong product offers that have run out of cash to private equity
- Brands using department stores as their physical channel
- Re-purposing of shopping centres and retail parks with mixed offering of residential, leisure and shopping
- Many empty units across our high streets so a possible opportunity for a more diverse retail offering than before, taking advantage of rents and business rates that are likely to be much reduced
- Multiple company voluntary arrangements and administrations
- More collaboration (rent-sharing, cost-sharing, staff-sharing and mixed product offerings and services)
- Increase of direct-to-consumer retailers
- Luxury brands will have to properly embrace online and invest quickly to rebalance their business model
- Some brands moving to a franchise model
- Overall size of retail sales will shrink around the world, but at differing degrees.
- Re-balancing of global supply chains and a reduction in sourcing from the Far East
- Size of non-clothing buys will reduce significantly, adversely affecting suppliers globally
- Inflation will hit in a big way and possibly take some consumers by surprise